IDEAS home Printed from https://ideas.repec.org/a/wly/finmar/v6y1997i5p45-60.html
   My bibliography  Save this article

The Risks and Returns of Brady Bonds in a Portfolio Framework

Author

Listed:
  • Sandeep Dahiya

Abstract

This paper examines the risks and returns of Brady bonds for the period 1990–1995 in a Modern Portfolio Theory framework. We find: (1) that the realized returns of Brady bonds are lower than the realized returns of other asset classes such as US stocks or US bonds; and (2) Brady bonds exhibit higher volatility compared to the other asset classes. These findings are largely explained by the influence of Mexico's devaluation of the Peso in December 1994. In addition, Mexico's devaluation is found to have had a strong (adverse) contagion effect on the returns on Brady bonds of other countries. The paper also finds that Brady bonds exhibit low correlations with US stocks and bonds markets. Thus, we find that there are potentially positive diversification gains from including Brady bonds in a domestic (US investor's) portfolio.

Suggested Citation

  • Sandeep Dahiya, 1997. "The Risks and Returns of Brady Bonds in a Portfolio Framework," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 6(5), pages 45-60, December.
    • Handle: RePEc:wly:finmar:v:6:y:1997:i:5:p:45-60
    DOI: 10.1111/1468-0416.00015
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-0416.00015
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1468-0416.00015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:finmar:v:6:y:1997:i:5:p:45-60. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.